Börsiteade

Pealkiri

Unaudited consolidated interim report for Q2 and 6 months of 2020

Teade

GROUP CEO'S REVIEW

The  results in the second quarter did  not bring any positive surprises. Due to
the continuing outbreak of Covid-19 at the beginning of the quarter, the pace of
sales  in the real estate sector was clearly slower compared to the previous few
years.  Nevertheless, all developments  have been kept  on schedule and work has
never been stopped.

Approximately  50% of  the  apartments  in  the  third  building of the Kodulahe
project  have  been  pre-sold  by  the  time  the report is completed, the sales
revenue  of which is expected in the  first quarter of 2021. The construction of
the  building  is  going  according  to  the  schedule.  The  preparation of the
construction  procurement for the IV and V  buildings of the Kodulahe project is
commencing - the starting time of construction depends on the achievement of the
desired construction price.

In  Tartu, Kodukalda 30 apartment development  is under construction pursuant to
the  schedule and  pre-sale contracts  have been  concluded for  the sale of 13
apartments. Sales revenue is expected by the fourth quarter of 2020.

Iztok  Parkside apartment buildings  in Bulgaria have  not received a permit for
use,  but the interest of clients is  persistent, which is also confirmed by the
fact  that 85% of  the apartments  have been  awarded pre-sale contracts. On the
issues  of  the  access  roads  that  continue  to  be a problem, we consider it
positive  news that these  streets have been  entered into the  ownership of the
city  of  Sofia,  making  it  possible  this  year  to submit an application for
authorisation  to the necessary authorities. However,  we must take into account
that growing Covid-19 cases in Bulgaria may slow down the authorisation process.

In  the Madrid BLVD  building, leases with  some companies were  terminated as a
result   of  the  economic  difficulties  brought  about  by  Covid-19, but  the
Bulgarian-based team again achieved occupancy with tenants by around 95%.

The  main issues for the current year  are: which development to channel capital
into,  to take  advantage of  fluctuating construction  prices, to  increase the
return  on equity and the desire to find ways to increment the funds of the land
bank for future developments in Estonia.

The  management  board  of  Arco  Vara  has received confirmation during Q2 that
today's  situation is very  different from the  previous crisis, as confirmed by
the  increase  in  market  activity  in  June  and  exceptionally  active  July.
Therefore,  the board's view  on the developments  in Estonia is optimistic, but
given the state of health care, in Bulgaria it is conservative.


KEY PERFORMANCE INDICATORS

In  Q2 2020, the group's revenue was  951 thousand euros, which is 37% more than
the  revenue of  695 thousand euros  in Q2  2019. In 6 months  2020, the group's
revenue  was 3,189 thousand euros, which is  83% more than the revenue of 1,746
thousand euros in 6 months 2019.

In  Q2 2020, the group's operating profit  (=EBIT) was 42 thousand euros and net
loss  69 thousand euros  (in 6 months  2020: operating profit 175 thousand euros
and  net loss of 49 thousand euros). In Q2 2019, the group had operating loss of
59 thousand  euros and  net loss  of 174 thousand  euros. In  6 months 2019, the
group  made operating  loss of  54 thousand euros  and net  loss of 286 thousand
euros.

In  Q2 2020, 5 apartments were  sold in projects  developed by the  group (in 6
months 2020 15 apartments). In Q2 2019, 3 apartments were sold (10 apartments in
6 months).

In the 6 months of 2020, the group's debt burden (net loans) increased by 2,420
thousand  euros up to the level of  13,870 thousand euros as of 30 June 2020. As
of  30 June 2020, the weighted average  annual interest rate of interest-bearing
liabilities  was 4.7%. This is an increase  of 0.5 percentage points compared to
31 December 2019.



OPERATING REPORT

The  revenue  of  the  group  totalled  951 thousand  euros  in  Q2  2020 (in Q2
2019: 695 thousand  euros,)  and  3,189 thousand  euros  in 6 months 2020 (in 6
months   2019: 1,746 thousand   euros),  including  revenue  from  the  sale  of
properties in the group's own development projects in the amount of 782 thousand
euros  in Q2 and 2,777 thousand euros in 6 months 2020 (2019: 440 thousand euros
in Q2 and 1,263 thousand euros in 6 months).

Most  of  the  other  revenue  of  the  group  consisted  of  rental income from
commercial  and office premises  in Madrid Blvd  building in Sofia, amounting to
148 thousand  euros in  Q2 2020 and  310 thousand euros  in 6 months (2019: 178
thousand  euros in Q2  and 350 thousand euros  in 6 months). The  Q2 of 2020 and
Covid-19 brought  changes in the economic  situation of tenants. Several tenants
have been replaced during the last months, but surprisingly in a more favourable
direction  for Arco Vara, that is why  we see the opportunity that starting from
the  autumn  2020 all  retail  and  office  spaces with the accompanying parking
spaces will be rented out.

In  the II  Stage of  the Kodulahe  project, which  was completed  at the end of
2019, commercial space remains unsold - the last apartment was sold in Q2 2020.
In 2020, Lahepea 9 house received building permit.

In Q2 2020, construction works continued in Stage III of Kodulahe project, where
a  building with 50 apartments will be located at Soodi 4 Merimetsa. The project
is  expected  to  be  finalized  by  the  Q1 2021. By the publishing date of the
interim report, 26 apartments have been presold.

Stages  IV-V of Kodulahe  have construction permits,  design works are finished.
The joint construction of Stages IV and V is scheduled to start latest in 2021.
The  apartment buildings  will become  ready for  final sale  in about 1,5 years
after the construction begins.

In  Q2 2020, construction works of Oa street  plots in Tartu continued, where of
4 smaller  apartment buildings are constructed under Kodukalda project name. The
construction  is scheduled  to end  in Q4  2020. By the  publishing time  of the
interim report, 13 out of 30 apartments have been presold.

In  Iztok Parkside project in Sofia, the final sale of apartments started at the
end  of Q4 2019, but the main sales  are planned to take place during 2020 after
receiving  an occupancy  permit. By  the publishing  date of the interim report,
presale  agreements  for  10 apartments  have  not been concluded. Iztok project
consists of three apartment buildings with a total of 67 apartments.

In  the Lozen project near  Sofia in Bulgaria, design  works have been completed
and  construction tender  is in  process. As  the development  was designed as a
premium class product, it has been decided to temporarily freeze the project and
wait   for   the  market  to  recover  from  Covid-19. Under  favourable  market
conditions, construction may start in 2021, divided into smaller sub-stages. The
project  foresees construction of 179 homes  (apartments and houses), commercial
spaces and a kindergarten. Minimum construction period is 2 years.

As  of 30 June  2020 and the  date of  this report,  4 Marsili residential plots
remained unsold in Latvia.



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

---------------------------------------------------------------------------
 In thousands of euros                      6m 2020 6m 2019 Q2 2020 Q2 2019
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 Revenue from sale of own real estate         2,777   1,263     782     440

 Revenue from rendering of services             412     483     169     255

 Total revenue                                3,189   1,746     951     695



 Cost of sales                               -2,541  -1,329    -714    -514

 Gross profit                                   648     417     237     181



 Other income                                     0      91       0       0

 Marketing and distribution expenses            -57    -153     -15     -68

 Administrative expenses                       -415    -382    -179    -149

 Other expenses                                  -1     -27      -1     -23

 Operating profit (loss)                        175     -54      42     -59



 Financial income and costs                    -224    -232    -111    -115

 Net loss for the period                        -49    -286     -69    -174



 Total comprehensive expense for the period     -49    -286     -69    -174
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 Earnings per share (in euros)

 - basic                                      -0.01   -0.03   -0.01   -0.02

 - diluted                                    -0.01   -0.03   -0.01   -0.02
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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   In thousands of euros          30 June 2020   31 December 2019
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  Cash and cash equivalents                781                870

  Receivables and prepayments              545                544

  Inventories                           18,476             15,807

  Total current assets                  19,802             17,221



  Investment property                   10,696             11,051

  Property, plant and equipment            257                265

  Intangible assets                        184                217

  Total non-current assets              11,137             11,533

  TOTAL ASSETS                          30,939             28,754



  Loans and borrowings                   7,800              6,416

  Payables and deferred income           3,303              3,135

  Total current liabilities             11,103              9,551



  Loans and borrowings                   6,673              5,904

  Total non-current liabilities          6,673              5,904

  TOTAL LIABILITIES                     17,776             15,455



  Share capital                          6,299              6,299

  Unregistered share capital               273                  0

  Share premium                          2,285              2,285

  Statutory capital reserve              2,011              2,011

  Other reserves                             0                245

  Retained earnings                      2,295              2,459

  TOTAL EQUITY                          13,163             13,299

  TOTAL LIABILITIES AND EQUITY          30,939             28,754
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Tiina Malm
CFO
Arco Vara AS
Phone: +372 614 4630
www.arcovara.com